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In 1971, instead of increasing, personal injury claims unexpectedly decreased by about one-third during the first six months of the year. In the first six months of 1970, the Massachusetts registry of motor vehicles recorded 76,160 personal injuries, while for the same period during 1971 it recorded only 48,906 personal injuries. The anticipated claims volume was off by about 50 per cent. The 30 per cent increase upon which the rate was set did not occur. Instead there was a 34 per cent decrease.
Three factors account for the sharp decrease. Undeniably, some of the missing personal injury claims were the result of no-fault’s eliminating many of the outright fraudulent personal injury claims. It is impossible to estimate accurately the percentage of fraudulent claims, but they may have accounted for as many as 10 per cent of the total filed under the fault system. It is also believed that a significant number of victims injured in accidents were so confused about their rights under no-fault, because of the cascade of plans discussed in 1970, that, not knowing their rights, they failed to submit a report.

The final factor and undoubtedly the most significant in this decrease was the unwillingness of the public to make personal injury claims against their own insurance policies, due to the long history of unfair cancellations and rate increases that it had come to expect from the companies. The insurance companies had successfully conditioned the public to the point where many preferred self- insuring small losses to running the risk of reporting the loss to their own insurance company.

The second critical miscalculation involved the amount of average payment per claim. Insurance companies set money aside as a reserve against future losses. For example, under the fault system in 1970, the companies put aside approximately $800 to cover the anticipated average claim payment. Before paying the loss, the money is held by the insurance company and invested for profit. Should the claim take four years to dispose of, the company can actually recover 30 per cent of the final payment—for example, on an average claim of $800, invested at 7% per cent per year for four years, the company can earn back about $240. The reserves are later adjusted when the actual loss payments are known. But, because of the investment potential, there are advantages for the companies in keeping reserves high.

For setting reserves, the no-fault system made it difficult to determine the average worth of a claim. Because of the elimination of pain and suffering, legal fees, and payment of some lost wages, it was acknowledged that the average claim payments would decrease considerably. The commission predicted that the average claim payment would be approximately one-half of what it had been in 1970. If the average fault claim cost $800, the typical no-fault claim was to cost $400. This turned out to be dead wrong. The two pivotal predictions, then, were that (1) claims would increase by 30 per cent and (2) claim payments would decrease by about 50 per cent.